A coal drilling site of Mongolia Energy Corporation. The company currently has 330,000 hectares of concession areas in western Mongolia for coal, ferrous and non-ferrous metal resources. China Daily

Mongolia Energy Corporation (MEC), a coal and energy resources developer in Mongolia, will start mining operation to produce 3 million tons of coking coal a year in mid-2009, to meet the growing demand in the Xinjiang Uygur Autonomous Region of China.

The energy resources developer currently has 330,000 hectares of concession areas in western Mongolia for coal, ferrous and non-ferrous metal resources.

Among which, the company has 149 million tons of coal reserves, including substantial coking coal deposits, within its 600 hectares of concession areas at Khushuut in Khovd province of Mongolia.

The consumption of coking coal in Xinjiang has reached 4 million tons per year. However, 2 million tons are produced in areas outside of the region, MEC Chief Executive Officer James Schaeffer said at a press conference yesterday.

Schaeffer said steel firms in Xinjiang have already started their expansions, which require 7 to 8 million tons of coking coal by 2010.

Although Xinjiang has a large variety of resources, for example, copper, gold and zinc, and 40 percent of coal bases on the mainland are located there, the region does not have coking coal needed for steel production, Schaeffer added.

"Therefore, the competition for us within Xinjiang is very limited," Schaeffer said, adding that steel firms there can produce better grade of steel with the company's superior quality coking coal.

MEC is currently upgrading and building a roadway from the coal mine in Khushuut to Xinjiang, costing around 866 million yuan.

About 243 km of the road foundation was completed in November, while the newly constructed road will interconnect with an existing roadway to the border with Xinjiang.

The company has also planned to increase its coking coal production up to 8 million tons a year by 2012, which will make it the largest coking coal mine in Mongolia. The company's coal mining operation may reach $151 million in the next two to three years.

Schaeffer stressed the company has sufficient resources to support its future development. "We will also look for possible strategic partnership," he added.

The company estimates the price of coking coal will range from 800 yuan to 1,500 yuan a ton in November, while the price will slightly decline to 680 yuan to 1,200 yuan a ton by 2010.

Shares of the company surged 8.19 percent, or HK$0.14, to HK$1.85 yesterday in the Hong Kong Stock Exchange.

Talking about the recent fluctuation in the company's share price, general counsel Mohan Datwani expressed hope that the stock will stabilize once the market understands better about their business.

(HK Edition 11/26/2008 page2)